Tax Code increased for untaxed interest

RG2015

I received a notice of coding today for 2022/2023 which included an amount for untaxed interest. My estimate for this year and actual for last year is about £600, so well within my £1,000 limit.

I spoke to HMRC and they have included estimates based on closed accounts, some of which last earned interest in 2018. We went through their top ten accounts by value and managed to reduce the estimate to about £600.

Hopefully this will also avoid any adjustments for this year as well as next year. It is also encouraging to see that the correction for next year has already been applied to my PTA online.

The way things stand, I fully expect HMRC to get this wrong every year. At least I have had early notice, and was able to correct this well in advance of it being used to calculate my PAYE tax for 22/23      

AlwaysLearnin

Yeah, it's a mess. I think they assume you'll get the same interest year on year for the accounts they're informed of, but for people that shift their money around to chase rates, and/or use regular savers with fixed period terms, and/or move money in to tax free wrappers, and/or spend their money, etc, it doesn't seem to work very well in that the interest figures seem to snowball...

Malchester

I have this every year with HMRC. No matter how many times I tell them they never get it right. I do not understand their system. I am currently a non taxpayer (for another couple of years) and the way they deal with untaxed interest is to reduce my tax code. It is irrelevant to me as I am still under the new tax code with earnings. But then, through the year they will change it for no reason. They did it a couple of weeks ago, I rang up and the person I spoke to said there was nothing on my account explaining why the change had occurred and she put it back to what it was. I can guarantee that in a few weeks time it will happen again.

Dazed_and_C0nfused

It is irrelevant to me as I am still under the new tax code with earnings

In which case why waste your time?

If your wages/pension income hasn't used your Personal Allowances then any spare Personal Allowance is used by the interest before either of the 0% rate bands for interest are available.

RG2015

My first pension payment for the new tax year has been entered on my PTA online, and I have been overtaxed.

Despite speaking to them, and agreeing an estimate of £600 for my untaxed interest, they have a figure of £1,048.

The monthly overpayment is only £0.80 so it is not a great concern. However, as a fact finding experiment, I am not going to get it corrected and see how long it takes them to do it.

Just for completeness, my calculation is £48 x 20% / 12 = £0.80

Thrugelmir

Log on via your Personal Tax Account and provide updated estimated/actual figures. Then no issues arise. 

RG2015

Thrugelmir said:

Log on via your Personal Tax Account and provide updated estimated/actual figures. Then no issues arise. 

Thanks for the advice, but my experience of entering corrections via my PTA online is that it only makes things worse.

I have no faith in the HMRC systems, but I am intrigued to see what their standard procedures will deliver.

Dazed_and_C0nfused

Despite speaking to them, and agreeing an estimate of £600 for my untaxed interest, they have a figure of £1,048.

Do you mean the interest deduction from your tax code allowances is £1,048 when you think it should just be £600?

Is the taxable pension payment (annualised) slightly more than the amount HMRC have estimated when calculating your tax code?

RG2015

Dazed_and_C0nfused said:

Despite speaking to them, and agreeing an estimate of £600 for my untaxed interest, they have a figure of £1,048.

Do you mean the interest deduction from your tax code allowances is £1,048 when you think it should just be £600?

Is the taxable pension payment (annualised) slightly more than the amount HMRC have estimated when calculating your tax code?

The interest deduction is £48, hence my monthly overpayment of £0.80.

My code has reduced from 1383M to 1378M (compared with 2021/2022)

My taxable pension income estimate is actually £1,048 higher than the figure they have quoted, but they have always done this. I believe this is just a presentation issue, not a calculation issue.

My annualised pension payment is about £11 higher than their own annual figure. Effectively, my tax code of 1378M gives me an annual tax free allowance of £13,793. 

badmemory

How many years has this been going on?  They haven't got it right yet.  Their "algorhythm" seem to have decided that interest has been at least doubling every year for the last at least 5.  I wish.

Melvinsmum58

Log on via your Personal Tax Account and provide updated estimated/actual figures.

I log on via the Government Gateway, and there is no place to amend bank interest that I can see (someone might know otherwise!). When this issue first arose about 5yrs ago, there was a way to see a list of accounts and interest gained, and amend them, or delete closed accounts, but not any more, to my knowledge.

We have the same problem, the highest we had was £1080 interest each about 6 yrs ago after we had an inheritance and some windfalls. We are down to about £50 each now (through investing not spending!).

I am not earning now, my last tax update last autumn showed interest of ~£700, so not worth contacting them about, and my husband does SA so adds the correct values then. But it is still so annoying.